Monday, May 23, 2011

Helping The Unemployed While Growing The Economy (An Easy Solution To Our Predicament)

I still find it fascinating that politicians can't seem to grow the economy. Even though many of them realize how it works, political theater and partisan politics always seems to get in the way. For anyone who doesn't yet understand it, I'll take some time to explain it so you can see how easy it is.

Let's say Bob is unemployed. All we need to do is have the government give Bob some money, say $150. Now Bob can take that $150 and buy a TV from Mike. Mike, being a wealthy businessman, will then pay $100 in taxes and he can be allowed to add the other $50 to his vast fortune. Now, since Bob bought an energy efficient TV, the government can give him a $50 rebate for making a wise choice. Add that $50 to the $100 in taxes that Mike paid and the government can then give Bob another $150 for his unemployment check the next week.

Bob can then take that $150 and buy a bike from Jack. Again, Jack is a wealthy man so he will pay $100 in taxes and get to keep $50 to add to his wealth. Since Bob is making the correct decision in riding a bike instead of driving a gas powered vehicle, he will receive another $50 rebate so he can get another $150 for his unemployment check the following week.

Now Bob has a TV, a bike and $150 having started out with nothing. So what does he do? Well, he takes that $150 and he buys a radio from Sam and a week later he gets another $150 unemployment check from the government. So now he has a TV, a bike, a radio and $150 after starting out with nothing. And because of this process, Sam, Jack and Mike all saw an increase in demand for their products and the economy grew as a result. This is just a win-win-win situation all around and it's exactly how we need to grow ourselves out of this mess we're in.

And hopefully at some point Sam, Jack and Mike can all go broke on their investments so that they can be unemployed as well and start collecting unemployment checks so the economy can grow even faster with all the extra aggregate demand the government would be producing.

Hopefully everyone reading this recognized the satire and sarcasm, but it is almost exactly the way many of our politicians understand economics.